Return to Sender: Netflix’s Misguided New Pricing and Branding Strategy

In my Brand Management classes, one of my favorite activities is looking at some of the really absurd mis-steps big, well-known brands have taken in the past.

We all know about Coke and New Coke, but there was also Colgate’s ill-fated entry into frozen dinners (can’t you just taste the mint in that chicken dish? Mmmh!), LifeSavers brand soda (bet dentists love that one), and my absolute favorite, Bic branded cologne for men (that must have been on everyone’s holiday shopping list).

This week we have a new candidate for what I call the Whatever Were They Thinking Award: Netflix.

Recently, Netflix decided they wanted to be in the streaming business, not the DVD-shipping business, so they dramatically raised their rates on movies by mail.

Then this week we saw an email apology from Netflix CEO Reed Hastings apologizing for the confusion and telling us he hadn’t shared all the good news: The original DVD part of the business is being spun off into Qwikster, while the streaming business retains the Netflix name. It’s great, I think, to have all these choices of streaming alternatives, personally I’m enjoying Movie Box.

Now, those of us who still are backward enough to like DVDs (shame on us!) will need to go to a new website, start a new movie queue and build a whole new set of recommendations over again, since our old information won’t transfer.

Hastings tries to explain the company’s logic in wanting to be in the streaming video business, not the DVD business. However, he’s totally missing the point.

Netflix is in the business of delivering  entertainment to consumers –easily and seamlessly. Period.

Whether that entertainment is via DVD, streaming video, on my phone using the ShowBox App, on my Nintendo, my iPad, or some other newfangled way yet to be invented is totally irrelevant.

Netflix had developed strong brand equity in the entertainment delivery business, so much so that they put Blockbuster out of business. Now not only are they introducing a new brand, but they’ve dramatically raised prices, they’re making their customers do a significant amount of additional work just to get the same service they had before at a higher price, and, by the way, there will be fewer offerings available  moving forward because several large content providers are cutting ties with them.

To Netflix, all I can say is Whatever were you thinking?

The lesson for the rest of us is do NOT force your customer to deal with you in a specific prescribed way. Give them multiple choices to work with you. Make it easy not hard.

Wall Street has already reacted negatively to this, as have many consumers who are cancelling their service.

This strategy should be stamped Undeliverable and returned in a red envelope back to Netflix. Or is that now Qwikster?

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